Four Ernst & Young partners were indicted today for allegedly creating illegal tax shelters for the firms wealthiest clients. At the same time prosecutors announced it would not bring charges against the accounting firm.
The four worked in a group Ernst & Young set up in 1998 to create tax shelters for clients making more than $10 million per year. At first it sported the color name Viper, which officially stood for Value Ideas Produce Extraordinary Results. At some point someone seems to have thought snakes in the accounting firm was not the best idea and the name was changed. But the goal of helping clients minimize taxes remained.
The accounting firm may have helped its clients create more than $7.56 billion in tax deductions, according to the business reporters at ABC News. The firm collected a fee of between 1.25% and 2% for ever dollar of tax deduction created, for a total of more than $115.7 million, according to the indictment.
The indictments come after a long investigation that stems back to the plethora of tax shelters that were big business for the accounting firms during the stock market rally of the late nineties. The decision not to charge Ernst & Young will likely be taken as a signal that the Justice Department is ratcheting down the investigations into the tax shelters of the last stock market boom. At one point it looked like law firms and investment banks might also be indicted. Declining to indict Ernst & Young may be a sign that the Justice Department is now aiming at the individuals involved with the allegedly abusive tax shelters rather than their employers.
At least one of those indicted today is not going quietly. A lawyer for Ernst & Young tax partner Richard Shapiro said today that his client was “disappointed that the Department of Justice and the United States Attorney’s Office have decided to go forward with the prosecution of an innocent man.” He went on to describe the charges against Shapiro as “baseless.”
Shapiro is a well known figure in tax circles. His views have been quoted widely in the press, and he has authored a booklet on taxes and investing.
How the Super Rich Avoided Taxes; Despite Making Millions [ABC News]
Ernst & Young Partners Charged in Tax Fraud [SmartMoney.com]
Posted by LippyTex , May 30, 2007 10:19PM
I am outraged!! Calling 4 E&Y folk "snakes"?!!?!?!?!
I'll have you know that snakes are valued members of our planet's eco-system and to equate them with accountants is just outrageous!!
Posted by guest , Oct 21, 2008 1:53PM
I never got along with my father, because he never understood what working with numbers meant to me. My career took me until now to unsuspected roads, but as everything else in life, my career at one of the Big4 firms had come to an end. I’m looking for a new challenge, so I’ve started searching for it and I found this: http://www.big4.com/home.html . My personal opinion is that if you want a new challenge in life you should try the Big4.com community.